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Costco has an ace up its sleeve as it competes with big box retailers online

7 months ago by Jon Marino in Markets

Big-box retailers are impressing and surprising investors this quarter despite a turbulent retail environment. Costco ($NASDAQ:COST) aims to be next when it reports earnings Thursday (May 30). 

At a time when other retailers are seeing disappointing earnings results, Target ($NYSE:TGT), Walmart ($NYSE:WMT) and Best Buy ($NYSE:BBY) each topped EPS expectations, juicing shares in the hours after they announced results. Online is increasingly factoring into top retailers' strategies, as big box stores are trying to compete with Amazon ($NASDAQ:AMZN) by allowing customers to purchase online, and grab their goods at the store

Analysts tracked by Zacks Investment Research expect earnings per share of $1.38. Alternative data that we track, including store-location growth, hiring trends, and foot traffic patterns via social media, paint an optimistic picture for Costco. 

Costco is still growing

Costco's growth has been coast-to-coast, and in limited instances, overseas. And, as the chart below reflects, hiring appears steady judging by its LinkedIn ($NASDAQ:MSFT) Employee Headcount. The growth in the number of stores is critical - more on that below.

Foot traffic keeps rising

Costco continues to attract consumers looking for bulk savings. Its Facebook ($NASDAQ:FB) Were Here Count - our aggregation of check-ins, mobile device shares, and photo-location tags made at a business' location - shows that consumers are going to Costco more in 2019. And that's critical, because it is opening new stores. Rising foot traffic on top if its new stores likely reflects that Costco's growing footprint is targeting the right consumers. 

Costco has one thing that its competitors do not - paying members. As the store adds headcount and builds out its footprint, that (improbably) makes the concept of having a growing number of brick-and-mortar stores an asset to the Washington-based retailer. Costco makes a staggering $3 billion annually in membership fees, and maintains engagement with consumers with a somewhat astounding retention rate of 90%. More stores, plus more foot traffic, and adding in subscribers should add up to a solid quarter. 

Were Here Count - our aggregation of check-ins, mobile device shares, and photo-location tags made at a business' location - shows that consumers are going to Costco more in 2019. 

But what could reverse Costco's fortunes is a less-than-optimal online shopping experience - and recent surveys has the company far behind both web and brick-and-mortar competitors. 

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Jon Marino

Jon Marino is Thinknum's finance editor, covering the impacts of alternative data on public companies and investors. Prior to joining Thinknum, Jon worked in the ...

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